Good evening. I‘m Chris Matthews. Welcome to HARDBALL. Well, the weather isn‘t the only thing that‘s turning nasty in December. Lots of buzz about snow today in Washington, but it‘s not the kind you‘re thinking of. Billy Shaheen, a co-chair of the Hillary Clinton campaign nationally, resigned after raising questions about Barack Obama‘s youthful drug use yesterday. Then last night, Hillary Clinton‘s top message man, Mark Penn, came on HARDBALL and dropped the word “cocaine” twice amidst a storm of criticism that Hillary Clinton was already going too far in attacking her opponent.

(BEGIN VIDEO CLIP)

MARK PENN, SENIOR STRATEGIST FOR CLINTON CAMPAIGN: Well, I think we‘ve made clear that the—the issue related to cocaine use is not something that the campaign was in any way raising...

Plus, Hillary Clinton has apologized, or actually been forced to apologize, personally to Senator Obama for the drug comments by one of her people. You can take that for what it‘s worth, given that her top man, as we just say, her top message man late last night mentioned cocaine twice on HARDBALL.

She isn‘t the only candidate, by the way, who‘s had to apologize for a personal foul lately in this campaign. Mike Huckabee, the Republican candidate now surging in the polls out in Iowa, apologized to Mitt Romney for something he said about Mormons in this Sunday‘s “New York Times” magazine. Are the formal apologies we‘re listening to right now just for show? Are they just apologizing to make it look good to somebody else while they get their point across? More on this in a moment.

Later in the hour, we‘re going to pick the latest polls apart. We‘re going to dig into the avalanche of numbers coming in tonight from Iowa, New Hampshire and South Carolina. And we‘ve got your “Politics Fix” tonight. And our “Big Number” tonight is the lowest we‘ve ever had. It‘s quite low.

In fact, it‘s very low.

We begin with HARDBALL‘s David Shuster, who‘s out on the campaign trail and caught Hillary Clinton‘s press conference today out in Iowa.

DAVID SHUSTER, HARDBALL CORRESPONDENT: Well, Chris, today Hillary Clinton publicly condemned the words of her campaign co-chairman, even as she refused to end the attention he brought to Barack Obama‘s indiscretions.

SHUSTER (voice-over): Today on a public television program in Des Moines, the suddenly vulnerable Hillary Clinton focused on electability, hers.

CLINTON: The second important question is, Who can win? If you decide who you think is the best president, I think that deserves more weight. But clearly, we want to be able to win.

SHUSTER: Clinton argued that because the Democratic nominee could be subjected to a ruthless and unfair Republican attack machine, she is the Democrat with the best chance in November.

CLINTON: I‘ve been tested. I‘ve been vetted.

SHUSTER: Clinton went on to say that with her, there are no surprises. Hillary Clinton‘s national co-chair in New Hampshire, Billy Shaheen, was trying to make a similar argument two days ago. He told “The Washington Post” that Barack Obama was vulnerable to general election attacks from the GOP because Obama has admitted he used drugs as a teenager.

CLINTON: I not only disapproved it, but that it, you know, did not reflect the campaign that I‘m running. And I did personally apologize, and the, you know, gentleman in question has stepped down from a leadership role in my campaign.

SHUSTER: Given the chance, however, Clinton refused to say where the line should be when it comes to voter consideration of personal indiscretions. And what did Clinton mean by “surprises”? At a news conference, Clinton denied that was an effort to direct attention to Obama‘s past.

CLINTON: No, it was directed at me. You know, I think, as many people have said—I‘ve read this quote from a lot of my supporters—I‘m a known quantity.

UNIDENTIFIED MALE: (INAUDIBLE) that candidates‘ indiscretions as teenagers should not be an issue for voters.

CLINTON: It certainly is not an issue in my campaign, and I said that very clearly to Senator Obama.

SHUSTER: That‘s different, however, from saying voters should not take it into consideration. And Clinton‘s refusal today to urge voters to ignore Obama‘s teenage years continues to prompt outrage from the Obama campaign. And yet, Obama‘s team is not exactly trying to bury the drug issue. They have sent out a fund-raising letter to supporters in an effort to leverage anger at the Clinton approach.

Meanwhile, John Edwards is hoping the food fight between Obama and Clinton will make him look and sound above it all.

JOHN EDWARDS (D-NC), PRESIDENTIAL CANDIDATE: What Barack Obama did or didn‘t do when he was a teenager is completely irrelevant to this campaign. And I think—first of all, I think raising it is a mistake, a huge mistake. I reject that, and even the serious discussion of it.

SHUSTER: With Edwards and Obama essentially tied with Clinton in Iowa, stories continue to surface that Bill Clinton is frustrated with his wife‘s campaign. Clinton also denied there will be any campaign reorganization.

CLINTON: I called my campaign and I said, Are we having a shakeup? I don‘t know anything about it.

(END VIDEOTAPE)

SHUSTER: Clinton said today that she always thought that this race would be close, but perhaps in a sign of her nervousness, she seemed to go out of her way to make the point that regardless of what happens here, that is not going to have a devastating impact on her long-term campaign, Chris. She went out of her way today to say that regardless of what happens here in Iowa, she has always planned to be in this race all the way through the February 5 primaries—Chris.

David Gregory, the old slogan was, “Things go better with Coke.” Who‘s this—who‘s this issue helping? Is it helping Barack, being a victim of what looks like a dirty attack, or it‘s helping Hillary by diminishing the electability quotient of Barack Obama next November?

DAVID GREGORY, NBC CORRESPONDENT: Well, if that‘s her intention, if

that‘s the Clinton‘s campaign intention, they seem to be missing the mark

here. The question of his electability, of his strength and his experience

that‘s exactly where they want to attack him, but that‘s not what‘s happening now.

I mean, what was striking last night on this program is that here is Hillary Clinton‘s chief strategist—not just message man, strategist, her guru, besides her husband, the guy who has predicted historic female voting patterns for Hillary Clinton, the guy who‘s written a book about all the microtrends in the country—and yet he‘s on this program and he‘s saying, Well, we‘re not raising the cocaine issue, even though he says “cocaine” twice. He basically says that, He, Obama, started getting mean before we did, and that, Oh, by the way, he‘s too ambitious, something that nobody would accuse the Clintons of.

So if that‘s a sign of where their campaign is...

MATTHEWS: Yes.

GREGORY: ... on the heels of Bill Clinton attacking the press and misstating his position about the Iraq war, it is a sign of defensiveness.

I want to show the clip right now, David, but he said—this is Mark Penn, who I always thought was a really smart guy—and I think he is, generally speaking, and Mark Penn, her chief message man, who writes the copy for her TV ads, so you can‘t say he‘s off message—this is the message—he says, Barack Obama called my candidate disingenuous, so I‘ll suggest he‘s a drug dealer. That‘s not exactly even-steven.

Let‘s take a look at what Mark Penn said last night. As you said, he used the “C” word twice.

(BEGIN VIDEOTAPE)

PENN: Well, I think we‘ve made clear that the—the issue related to cocaine use is not something that the campaign was in any way raising, and I think that‘s been made clear. I think this kindergarten thing was...

TRIPPI: What happened, though—look, the person who won today was John Edwards. Why? Because he‘s speaking to the frustration of Americans about something that‘s going on, how greed‘s taken over Washington, is stopping health care from happening, stopping trade—you know, trade deals that go through that talk about corporate profits. He was talking about real stuff that is really, really affecting working people here in Iowa, who are frustrated and worried about their jobs, while we listen to this garbage that‘s been going on for a couple of days now. It needs to stop.

(END VIDEOTAPE)

MATTHEWS: You know, it‘s amazing. We all think back on “The Wizard of Oz”—I always did—to the men behind the curtain. Who is the man behind the curtain? We just saw three of them right there, Axelrod, who was outside, but the two guys inside were mixing it up.

By the way, they are all well-fed consultants, you notice. But there‘s Trippi...

(CROSSTALK)

MATTHEWS: ... Trippi and Mark Penn going at each other. Just a minute David. I have to give Andrea a chance here. Andrea, it just seems like we‘re watching the rough edge of the guys advising these guys, this candidates, Hillary, in this case, John Edwards.

ANDREA MITCHELL, NBC CORRESPONDENT: Well, Joe Trippi jumped right in thee for John Edwards, who really does feel that he can come in on the inside, rising above all of this, having really been tough and some people felt too aggressive for the taste of Iowa politics. He‘s now Mr. Nice guy...

MATTHEWS: Right.

MITCHELL: ... while these two guys are mixing it up. Look, Obama came right back today in an interview, made it clear that when he and Hillary talked, when she apologized to him yesterday en route to Iowa...

MITCHELL: ... from D.C., that—he said, Look, you know, you have to take responsibility. And what he said today is, I told her that I would have fired him. In other words, Don‘t let...

MATTHEWS: So he is—he is...

MITCHELL: Don‘t let Billy—he‘s not backing off. He‘s saying...

MATTHEWS: He‘s scolding her still for letting her people speak this way...

MITCHELL: Exactly.

MATTHEWS: ... especially, he must be thinking, Wait a minute, I scolded her, and later in the afternoon, she responded to my scolding by having Mark Penn come out and nail me for cocaine twice.

MITCHELL: But then he sent out—he, Obama, sent out a fund-raising letter. He has—they‘ve made the calculation, the Obama people, that they have more to gain by showing her playing old-fashioned politics, negative politics, the way they would cast it, at least, than to lose from bringing this up, at least in a Democratic primary context.

MATTHEWS: What‘s the weekend line on this, David Yepsen? You‘re political columnist for “The Des Moines Register.” Your reporting this weekend, what is the score on this? Is Obama winning because he‘s the victim of what looks like a sleazy campaign effort to tie him up as an old drug dealer, literally, or is it Hillary, who‘s been able to damage him as electable?

DAVID YEPSEN, “THE DES MOINES REGISTER”: No, I think it‘s John Edwards because of the reasons Joe Trippi said. If Edwards can stay above the fray, the pattern out here has always been that candidate comes out ahead. And John Edwards, as you just mentioned, took a hit, started going negative, his numbers dropped. He‘s backed off. He‘s Mr. Nice Guy now. And Obama and Clinton—you know, this doesn‘t sell very well.

MATTHEWS: Well, what do people make out there—what do people make out there, David—and then David Gregory jump in. David Yepsen, what do people make in Iowa of the charge that a guy, who as a teenager admitted having used drugs, including cocaine, if you read the book, and did it quite candidly about the part of growing up and making mistakes and wasting his life as part of his sort of rite of passage, if you will? How does that play, just that fact, if it‘s clear that he did use drugs? Does that hurt him, or is it considered...

YEPSEN: No, it doesn‘t hurt him. It‘s incidental to who he is. And there‘s a statute of limitations on this stuff. Voters, caucus goers—I mean, we‘ve all got things in our past that we did as young people that we regret now, that we shouldn‘t do, that we tell people not to do.

MATTHEWS: Yes.

YEPSEN: And so I think there‘s a political statute of limitations here, and he‘s clearly, I don‘t think, going to be hurt by this.

MATTHEWS: Let me go—David Gregory, your thoughts?

GREGORY: Well, I just think, what it is that Barack Obama is doing to engage this? I mean, David is talking about John Edwards perhaps coming out ahead, and I don‘t disagree with that. But I don‘t see over the last couple of days that Barack Obama has really jumped in with both feet into this fight. I think he‘s sort of above the fray in many ways, as well.

It‘s Hillary Clinton who is dominating the story here with decisions she‘s having to make, apologies she‘s having to make, and getting in her own way. Let‘s look at the debate yesterday out in Des Moines—a perfectly good and penetrating question to Barack Obama on this question of turning the page generationally, when he is dipping into the Clinton foreign policy establishment to get his foreign policy advice.

She gets in the way of that moment by her laughing at him sort of condescendingly and saying, yes, I want to hear the answer to this, and then he reels off a very quick comeback line, when he should have been forced to deal with the actual question, which is, you know, there‘s some hypocrisy there. So I think that‘s the predominant issue here.

MATTHEWS: Let‘s watch that right now, since David Gregory pointed to that. This is from yesterday‘s debate.

UNIDENTIFIED FEMALE: Senator Obama, you have Bill Clinton‘s former national security adviser, State Department policy director and Navy secretary, among others, advising you. With relatively little foreign policy experience of your own, how will you rely on so many Clinton advisers and still deliver the kind of break from the past that you‘re promising voters?

MATTHEWS: Well, what about that charge or that argument by David Gregory, David Yepsen, that basically, this has been a one-person attack on another. It hasn‘t been two people skirmishing.

YEPSEN: Oh, I think Barack Obama gets sullied by this. His people (INAUDIBLE). He‘s putting out a fund-raising appeal on it. I don‘t think he can stay out of this. I think he gets sullied by this, too.

MATTHEWS: Are you guys going to endorse John Edwards this weekend at “The Des Moines Register”?

YEPSEN: Oh, no. I think it is significant, particularly in a competitive Democratic primary fight. The paper‘s on the left-hand side of spectrum. It has some credibility with these things. But I‘m out of that loop and I want to stay out of that loop, and so I‘ll just have to let the editorial people speak for themselves.

MATTHEWS: Yes. Well, you‘ll be on for another 15 minutes, so maybe you‘ll get the call to do the story because there‘s always a story that has to be written, a front page story, a mainbar story that‘s got to be written on these endorsements, because, as you said, it‘s a news story.

David Yepsen, stick with us. David Gregory, Andrea Mitchell, they‘re all staying with us. We‘re going to talk about this new phenomenon in American politics—maybe it‘s an old one—you apologize, but you don‘t actually mean it. Meanwhile, you kick the story along the road, you keep it hot, and you try to say, Well, it wasn‘t me.

And later: With the race red hot and the voting just around the corner, we have an avalanche of new poll numbers just coming in tonight from Iowa, New Hampshire and South Carolina. So stay with us and get our “Polls Apart” feature tonight.

MATTHEWS: Welcome back to HARDBALL. We‘re back with NBC‘s David Gregory and David Yepsen of “The Des Moines Register” and NBC‘s Andrea Mitchell.

I want David Gregory to start with this, from the White House, and that is this question. Have you noticed the plethora of cases recently where politicians say something they know will hurt the other person, and then they wait for 24 hours for the hurt to sink in and everybody to watch the other person grabbing at their gut or whatever, and then they say, Never mind. It‘s like Rosannadanna, it‘s like Gilda Radner, I didn‘t mean to say that, but now that I got my point across, let‘s love it.

GREGORY: Well, there is a cynicism about this, this approach to, Well, I can put something out there that‘s clearly going to have some impact, that we hope to have some impact, and then I can bring it back in, say I‘m sorry, personally, and then it‘s all put to bed.

You know, Mark Penn said this last night on the issue of the cocaine use with Barack Obama, say, Oh, no, we—this issue is dead now. This is over. We‘ve moved beyond this. It can all sort of be, you know, contained in that way. Yes, there‘s something eerily similar early similar to the Mike Huckabee incident against Romney and Clinton against Obama.

MATTHEWS: Right. David Yepsen, is there anybody in Iowa right now who reads the newspaper, your newspaper, who doesn‘t know that Mormons may have a question about the nature of the relationship between Jesus and Satan? Has that story gotten everybody out there? Has that gotten around? Or the idea that Barack Obama used drugs when he was a teenager? In other words, the information, it seems to me, has gotten out there, whatever the apology factor might be.

YEPSEN: No, I think that is right. The information is out there.

And people have paid some attention to it. But it is part of the back-and-forth of a—of a campaign. We are coming into a very sensitive period of time for campaigns, though, now, Chris. And that is, we‘re coming into the holiday season.

And, so they...

MATTHEWS: Yes.

YEPSEN: Here in Iowa, where people hate negative campaigning anyway, I mean, now you‘re coming into a time of the year when—when it is very hard for them to do it.

And what are you going to do? Do an attack ad with “Silent Night” playing in the background?

(LAUGHTER)

MATTHEWS: Yes.

(LAUGHTER)

YEPSEN: And, secondly, it‘s coming into a time when people are starting to make their decision.

Four years ago, Chris—I checked the...

MATTHEWS: Yes.

(CROSSTALK)

YEPSEN: ... polls -- 42 percent of the people—of the caucus-goers four years ago decided what they were going to do in the last two weeks. We‘re now entering into that period. So, campaigns have to be very careful about how they do any of this stuff, attack, apology, all of that.

ANDREA MITCHELL, NBC CHIEF FOREIGN AFFAIRS CORRESPONDENT: And what the Obama people were saying yesterday in New Hampshire was, there is a pattern of this. I mean, it was—it was Clinton people who already had to be let go, some of their other volunteers, because of some immigration issues that had been raised against Obama.

You know, there has just been a pattern, according to the Obama people. But they are then putting it out there, as we have said, in this fund-raising appeal. So, I think...

MATTHEWS: Yes. Does anybody not think that Billy Sheehan is going to get an ambassadorship if he wants one? I mean, down the road, they‘re all going to be rewarded.

MITCHELL: The question is whether Billy Shaheen, who is a major player, and was a key get for them in New Hampshire, whether he, after Iowa, is going to be quietly, behind the scenes, still working for the Clinton team.

(CROSSTALK)

MATTHEWS: Well, let me ask you about just logic.

You know, there was a great old movie. It was “Anatomy of a Murder.” It was Ben Gazzara who was it. I think he was the bad guy. Jimmy Stewart was the good guy lawyer. And Jimmy Stewart approached the jury after somebody had just dropped one of these bombs on the jury, and it was stricken from the record. The judge says, erase that from the record. Don‘t—and he says, that is like saying to this jury, don‘t think of a blue cow.

(LAUGHTER)

MATTHEWS: Well, everybody in that jury is going to think of a blue cow until the end of the trial, because you said don‘t think of one.

This information, it seems to me, gets into people‘s head. As you say, they talk about it over the turkey or the ham this Christmas and New Year‘s. Does it have an impact? Or do they only remember, that SOB said this about this other guy?

I mean, I think there are some people who are going to be offended by it. Some people will say, well, you know, this—this—what do we know about this Barack Obama?

You know, once again, this is another example, in my book, of how the Clinton campaign has been late from the very beginning, getting started late. And here we are, 20 days before the—before the election, and they are doing stuff they should have gotten out earlier.

Barack Obama can‘t expect a free ride in this presidential race...

MATTHEWS: Yes.

YEPSEN: ... like he got in those Illinois Senate races.

Democrats are entitled to—to have him vetted. Certainly, Hillary Clinton has been in her career. That‘s why her negatives are so high. And, so, the Clinton campaign has got to raise some questions about him. Maybe Democrats won‘t care about it, but they sure should know about it before they go in and support him.

YEPSEN: ... right before the holidays, and—and near the end of the campaign, and she is looking like she is having to go negative.

MITCHELL: And, in fact...

YEPSEN: It is a late campaign.

MITCHELL: And, David, at her press conference today, she tried to make the point. Even after the apology, she said, look, I have been vetted. I have been checked out.

MATTHEWS: Yes.

MITCHELL: So, she was still raising questions about Obama‘s electability at that news conference today.

(CROSSTALK)

MATTHEWS: The big question for voters, and for David Yepsen, everybody on the ground out there, is, can Hillary get away with running ads like she is right now, showing that her mother lives with her?

I mean, the ad says, “My mother lives with me,” showing how cuddly and nice she is—and I think Hillary is a nice person as an individual, certainly—but, at the same time, be seen putting the dagger in? I don‘t know whether you can do both at the same time, be Ms. Nice and Mr. Not Nice.

MATTHEWS: Thank you, David Yepsen, from Iowa. We will be watching to see who your editorial people endorse.

And, Andrea Mitchell, as always.

Up next: Hillary gets warm and fuzzy, as I said. Obama cashes in on Clinton‘s negativity. And the HARDBALL “Big Number” tonight ain‘t so big.

You‘re watching HARDBALL, only on MSNBC.

(COMMERCIAL BREAK)

MATTHEWS: Welcome back to HARDBALL.

So, what else is new out there.

Well, suddenly cuddly? Are you watching Hillary‘s mad dash to soften herself up, make herself more charming, more nice girl next door? First, she got her daughter and her mother traveling with her on the campaign trail. Then she ran the TV advertisement saying that her mother lives with her.

Now she has got a commercial with mom and Chelsea both in the picture.

CLINTON: You know, as I travel around, I see so many families who share the same values I was brought up with. My mom taught me to stand up for myself and to stand up for those who can‘t do it on their own. I‘m proud to live by those values. But what I‘m most proud of is knowing who I have passed them on to.

I‘m Hillary Clinton, and I approve this message.

(END VIDEO CLIP)

MATTHEWS: And, actually, that is what Hillary is like, if you ever get to meet her in a small room. That is what Hillary is actually like.

But the fact is, Hillary is running a take-no-prisoners campaign. And people are telling pollsters they don‘t like it, especially the way the Hillary campaign is trying to use the drug issue against Barack Obama.

Here‘s new video from Barack Obama which highlights the negativity of the Clinton camp. It shows a former Clinton precinct captain who switched over to—over to Obama‘s camp.

I have always been involved in politics. Finally, to see a woman run, I got involved early on, licking stamps, stuffing envelopes. I was really surprised to see personal attacks from one Democrat to the other Democrat. What is the campaign coming to? It is silly to talk about being in kindergarten and deciding that you want to be president.

I had always liked Barack Obama. It was always difficult to make this decision. But it didn‘t become difficult anymore.

(END VIDEO CLIP)

MATTHEWS: Wow.

The Associated Press asked the 2008 candidates what their most prized possessions are. Wait until you catch these answers.

Barack Obama said—quote—“a Photograph in my office of the cliffs of Oahu‘s South Shore, where my mother‘s ashes are scattered.”

Rudy Giuliani said “my grandfather‘s pocket watch.”

Fred Thompson‘s response: “my trophy wife.”

You heard it, “my trophy wife,” his favorite possession. His wife is a possession. That is going to go over well with the wives clubs around the country.

Finally, its time for the HARDBALL “Big Number.” “The Politico” reports that Iowa Republicans might hold another debate before caucus day on January 3. You will recall that this week‘s GOP debate was supposed to be the very last debate.

The reason for an 11th-hour debate? Well, because, in my humble opinion, on a scale from one to 10, Wednesday‘s showdown that we all watched for an hour-and-a-half was a big, fat, boring zero. Zero, the most boring debate in history.

Somebody went—Charles Krauthammer said, the worst debate in the history of man. Zero, that is our “Big Number” tonight, the quality, as television and as politics, of that debate out in Iowa.

A bigger-than-expected jump in consumer inflation helped shake investor confidence that the Federal Reserve will make any further interest rate cuts. Consumer prices rose eight-tenths-of-a-percent last month, the biggest monthly increase in two years.

Meanwhile, industry production rebounded in November, rising three-tenths-of-a-percent, after falling a sharp seven-tenths-of-a-percent in October.

And American Airlines says it is recalling 247 furloughed flight attendants. The world‘s largest airline says it has recalled more than 900 flight attendants this year, but nearly 1,200 are still awaiting an invitation to come back to work.

We have some great new numbers on the presidential race, an avalanche of them, as I said. We have got “Politico”‘s Roger Simon and “The New Republic”‘s Michael Crowley.

And let‘s go through the numbers together, all three of us. I will have a thought or two as well, Michael and Roger.

Let‘s take a look at Iowa first, the Democrats and Republicans, and then go through it.

In the “Quad City Times” poll, Obama—that‘s out in Iowa—has a nine-point lead now over Hillary and Edwards. So, he is clearly, right now, this weekend in December, the favorite out there.

The same poll, “Quad City Times,” gives Huckabee a nine-point lead over Mitt Romney in Iowa.

Roger, we now have a front-runner in both parties in Iowa.

ROGER SIMON, CHIEF POLITICAL COLUMNIST, THEPOLITICO.COM: We do.

And even worse for Hillary Clinton than the raw numbers are the fact that Obama‘s trend lines are so much better than hers. He has got an increase of 32 percent in the last month. She has got a decrease of 11 percent in the last month.

Iowa is notoriously hard to poll. It often doesn‘t reflect organization. The real trouble for Hillary Clinton, and I think why the campaign is so off stride is, Obama backs up his numbers with a really good organization in Iowa. He‘s got a good ground game.

MATTHEWS: Do you accept the law of physics, that an object remains in motion unless operated on by an outside force? In other words, if you let things go, he continues to rise?

SIMON: Yes. She has got to change the conversation, but I think she is doing it the wrong way.

She has gone negative in direct ways. She has gone negative in sly ways. She has gone negative just in stupid ways, Mark Penn‘s...

MATTHEWS: Yes.

SIMON: ... raising the cocaine issue on with you yesterday.

MATTHEWS: Yes, right here.

SIMON: But maybe she should just try to act—instead of like a panicked former front-runner, she needs to get a scrappy underdog image of fighting back, having people admire her once again.

MATTHEWS: Well, we are going to have to put up with that storyline in New Hampshire. You know, I can just hear Bill, Bill Clinton, coming, you know, my wife is the comeback girl, you know, just like me.

SIMON: The trouble is, New Hampshire probably no longer a fire wall for her.

MATTHEWS: Well, let‘s take a look, one more thought.

I want to get Michael Crowley in here.

What do you see? Do you see these—these front-runners remaining front-runners the next several days?

MICHAEL CROWLEY, SENIOR EDITOR, “THE NEW REPUBLIC”: Well, Chris, I mean, the funny thing about campaigns, as you know, is that there is always a change in narrative.

So, you know, the—the best you could say for Hillary, and also for

for Romney, is that their opponents have peaked maybe a little bit early. Now, I‘m not saying—I‘m not saying this is absolutely the case, but it is their hope that it is not too late for them to kind of come back.

And I will say that, in some ways, it might be good for Hillary to say that she fought for the nomination, didn‘t just kind of waltz to it, the way it looked like she was going to.

That said, I would rather be Obama and Huckabee right now than—than Hillary or—or Romney.

MATTHEWS: So, both Huckabee and Romney—both Huckabee and Obama have momentum and they have the edge, almost double-digit now. That is how we are going to leave it for the weekend.

And, by the way, we‘re only a couple weeks from the actual balloting out there. It‘s not a mile away anymore.

Let‘s go. So, in Iowa, we know we have got front-runners. We have got Obama and we have got Huckabee, brand-new front-runners both with momentum and both with advantages of almost 10 points over their rivals.

Let‘s take a look at New Hampshire now. The new numbers just in from New Hampshire show Obama and Clinton roughly even up there, but Obama has got the momentum. Look at those numbers. Look how close they are now compared to where they were before, Roger. Look at that, 32, 31, same number, basically.

SIMON: Right.

I mean, again, the trend line is, he has increase of nearly 39

percent. She has an increase of only 15 percent. What—the best thing

that could happen to Hillary Clinton is for the—you will understand this

I will explain it—is for Mike Huckabee to do very well in Iowa. She needs to keep the independent voters of New Hampshire away from the Democratic side of the ticket.

But I do think it‘s definitely the case that, when it looked like Hillary was going to coast to it, was going to sail to it, Obama was missing out on one of his great reservoirs. I mean, it seems he‘s very appealing to independents.

And when independents thought there was nothing going on, on that side, he wasn‘t—it was a pool he wasn‘t going to tap into. So, he is definitely benefiting. The mere fact of the race being close is great news for him, because I think it whips up interest among people who are naturally inclined to support him.

Incidentally, the more independents Obama gets, the fewer John McCain gets. And John McCain has stalled out in New Hampshire. I won‘t jump ahead. We can talk about the Republicans in a minute, but that is something McCain is worried about.

MATTHEWS: OK.

Let‘s talk about the Republicans in New Hampshire right now, Michael, you first.

Let‘s take a look at the numbers up there. We saw a dead heat on the Democratic side. That could be the most exciting race. This one is not close. Mitt Romney enjoys a substantial lead over Giuliani and McCain. Huckabee is sort of in the race now, but just beginning to be in the race.

It looks to me like Romney has a pretty good situation up there, even compared to where he was before. He still looks at least as strong as he was two or three months ago, in fact, stronger.

Michael Crowley?

CROWLEY: Well, again, I mean, just—you know, Roger made—made the point about the excitement on the Republican side. That is the thing that John McCain is hoping for.

Look, another thing that people don‘t talk about is, this is Mitt Romney‘s backyard. I mean, in a lot of other contests, people say, well, so and so had a home-state advantage, so it doesn‘t count. I mean, Mitt Romney really has this built-in advantage.

And I‘m surprised that the political conversation hasn‘t actually been a little tougher on him about how—his performance in New Hampshire. But John McCain thinks he has a shot at winning New Hampshire. He got the endorsement of “The Union Leader.” He has Curt Schilling on TV for him. He has a lot going for him.

But he does seem to have plateaued. So, I‘m—I‘m surprised that that has happened. I still think that he has a shot at it but the numbers really are not moving for him.

MATTHEWS: Well, better Curt Schilling than Roger Clemens this week. Oh poor guy. I mean, Roger Clemens is one of the heroes of our time, and to be branded by this drug thing.

Let‘s talk about—so your thoughts, Roger, on New Hampshire? It looks to me like Romney is still the favorite up there?

ROGER SIMON, CHIEF POLITICAL COLUMNIST, POLITICO: Oh, he is still the favorite. But Huckabee is going to have five days. Let‘s say Huckabee wins Iowa—which he may not do. But let‘s say he does. He has five days to turn that into something. It is not even a matter of raising money. He is going to have little opportunity to spend money...

MATTHEWS: New Hampshire ain‘t Huckabee country. I‘m just going to say it, it may not be Romney perfect but it ain‘t Huckabee.

SIMON: Exactly, because it may be the same tale of Pat Robertson. You have this Baptist minister who wins Iowa and then comes into New Hampshire and gets slapped in the face by voters who say, we are not that kind of state. That‘s what he is fighting. But he has got to show that the Iowa momentum is not just a fluke, that he it really is momentum. He is not going to be able to buy a lot of TV time, because it is already sold.

MATTHEWS: So it looks like we have got—just to sum up, it looks like we‘ve got a fight on the Democratic side both in Iowa and in New Hampshire, especially New Hampshire, and on the Republican side, it looks like we‘ve got a fight in Iowa. It looks like Romney is ahead in New Hampshire.

Let‘s go to South Carolina. Hillary leads down there but Obama has got the mo. Let‘s take a look at these numbers. Those look far apart and they are in fact 8 points apart. But look where they were before. Now let‘s try to explain this, gentlemen. Let‘s got to African-American or black Democrats. And look at these numbers. They explain why Obama is catching up. Because he has already caught up—among African-Americans, he is even with Hillary.

That to me is an interesting—and I was figuring out the baseline there. He has picked up almost, you know, something like—he has closed like a 20-point gap basically among African-Americans, but since they are only about half the vote down there on the Democratic side, that doesn‘t take him all wait up as far as he has to go. He has to—it seems to me, he has to turn some white voters around, too.

SIMON: Well, he does, but only half the vote is still pretty good for one interest group. I mean, his argument is to black voters in South Carolina—both his and his wife‘s, is look, he is not doing better among blacks, not doing overwhelmingly good among blacks, because some black voters think he can‘t win the presidency.

MATTHEWS: That‘s right. And they will be moved, I think that South Carolina will move, as goes Iowa and New Hampshire, so will go South Carolina. Because.

MATTHEWS: . if two states dominated by whites vote for Obama, it would seem to me the African-American voters would say, hey, maybe something is changing here?

SIMON: Exactly the point, exactly why Hillary has to...

(CROSSTALK)

MATTHEWS: Maybe, maybe. And it would be hard to vote against a guy who looks like he could well be the first black president.

SIMON: Exactly.

MATTHEWS: Let‘s try this. I want to bring Michael in this next one.

Let‘s take a look at Huckabee down in South Carolina. No surprise there. He is a Southern boy. He is a Baptist. And he is in home country here in South Carolina. He has taken away—now I‘m surprised by this because I have always boosted Rudy Giuliani‘s chances, even down there.

Look what happened to Rudy Giuliani, guys, in July he was a substantial leader down there in South Carolina. The guy from New York, 30 points. He is down to 16. He has lost half his vote. And out of nowhere, nowhere, Huckabee has gone from 3 to 24. He is eight times what he was down there two months ago. Have they just discovered this guy? I guess so. Roger?

SIMON: Here is another interesting thing, Republican voters don‘t say that Rudy Giuliani has the best chance of winning in November—I mean, don‘t say Huckabee does, they say Giuliani does. So but they are clearly voting with their hearts. They are sending a message. They don‘t care who is going to win. They don‘t want the Mormon. They don‘t want the New Yorker. They want the guy who sounds like them and is like them.

MATTHEWS: And 90 percent of politics is, is he one of us or one of them? And if he is one of us, is he any good? And the second question is, is he any good?

CROWLEY: . first question, if I remember the number correctly, a recent Pew poll said that 53 percent of the Republican voters in South Carolina are white evangelicals. So talk about, is he one of us? That is 53 percent of these people who are naturally going to say, absolutely.

MATTHEWS: And by the way, a lot of white voters I think are saying when they look at Barack Obama, it‘s not exactly fair to say he is not one of us or one of them, it is more like, he is one of us, generally. It‘s a very inclusive thing that I think they feel about him.

Anyway, thank you, Roger Simon. Thank you, Michael Crowley. Up next, the “Politics Fix.” This is HARDBALL, only on MSNBC.

(COMMERCIAL BREAK)

BRIAN WILLIAMS, NBC ANCHOR: We hope you can join us for the Friday edition of “NIGHTLY NEWS” on your local NBC station. The latest trouble in New Orleans, the day after. And the baseball scandal. And we‘ll look at the next big storm that is getting ready to scoot across the U.S. and hit the East Coast. That and more on “NIGHT NEWS” tonight.

MATTHEWS: Welcome back to HARDBALL. Now it is time for the “Politics Fix” with our roundtable. Jennifer Donahue of the New Hampshire Institute of Politics up there. Stephen Hayes is with The Weekly Standard. And MSNBC political analyst Craig Crawford is joining us.

Craig, you get to start. What is the Hillary campaign up to? Why would they put the knife in from both the national co-chair the other day and now with Mark Penn on the drug use issue against Barack Obama in the midst of an apology campaign by Hillary and a cuddly-up by—I live with my mother campaign? Doesn‘t seem to fit together.

CRAIG CRAWFORD, MSNBC POLITICAL ANALYST: Well, you know, first of all, I laugh a bit at everybody says, oh, we are so tired of arguing about the Clintons, and then they go ahead and argue about the Clintons all week long. So she has been the topic all week. I‘m not saying that is the way she would want to be talked about, but she has been the dominant story all week long and they are trying to make a case that he is not electable. And that is.

MATTHEWS: So you think it is fair ball for them to put out the fact that he would be attacked on his drug use later in the general election? You think that is fair ball?

CRAWFORD: I think it is fair ball because I think what he wrote when he was 34 years old in his first book about those years, talking about how he did blow when he could afford it, and didn‘t do smack, but pot helped him, I mean, those are quotes that you can see in a Republican—or a third party, probably, attack ad, not a Republican Party ad in a general election.

MATTHEWS: So you say, don‘t blame the messenger, that that was just a fair thing to bring out?

CRAWFORD: I think Democrats are making fundamentally a choice of who can win this election. These candidates are so close on the issues and in the final analysis that is what Democrats have to decide. And I think any candidates has got a right to make that argument.

MATTHEWS: Stephen Hayes, your thoughts?

STEPHEN HAYES, THE WEEKLY STANDARD: It is not the issue as much as it is the weasely way that he brought it out. I mean, this is.

MATTHEWS: Well, let‘s look at that. I love the way you talk. Let‘s take a look at Mark Penn last night on HARDBALL, the way he brought up the issue of cocaine.

(BEGIN VIDEO CLIP)

MARK PENN, HILLARY CLINTON CAMPAIGN STRATEGIST: Well, I think we have made clear that the issue related to cocaine use is not something that the campaign was in any way raising. And think I that has been made clear. I think this kindergarten thing was a joke after Senator.

JOE TRIPPI, JOHN EDWARDS CAMPAIGN STRATEGIST : I think he just did it again. He just did it again.

TRIPPI: No, no, no. No, no, Mark. Excuse me. This guy has been filibustering on this. He just said “cocaine” again. It‘s like this is what.

PENN: I think you are saying cocaine.

TRIPPI: No, no. You just did it. And I think there is something wrong.

(CROSSTALK)

MATTHEWS: OK. Joe Trippi‘s turn. Joe Trippi‘s turn.

(CROSSTALK)

TRIPPI: No, look, the person who won today was John Edwards. Why? Because he is speaking to the frustration of Americans about something that is going on, how greed is taking over Washington, it stopping health care from happening, stopping trade—you know, trade deals that go through that talk about corporate profits.

He was talking about real stuff that is really, really affecting working people here in Iowa who are frustrated and worried about their jobs while we listen to this garbage that has been going on for a couple of days now, it needs to stop.

MATTHEWS: Well, that was Joe Trippi brilliantly grabbing—notice how the camera guy, he pulled the camera over to him so he could call the guy for saying “cocaine” twice in the midst of what looked to be an apology campaign by Hillary.

HAYES: Look, this is politics by paralipsis, basically means Mark Penn brought this up in a way that made it look like he was dismissing it. But clearly he was not only bringing it up, but he was going deeper. I mean, it was clearly by design.

MATTHEWS: He said C-word—let me go—do things go better with coke with this campaign? I mean, is this going to help him, right? They think it is going to help him. Jennifer, I want your thoughts on this, New Hampshire may not have the sensibility—you don‘t have to jump it, you‘re in. Does New Hampshire have the same sort of sensibilities of Iowa, which is, they don‘t like nasty campaign? Or do they say, hey, Hillary is pretty tough, she is pointing out the guy‘s drug use, that may hurt him in the general?

JENNIFER DONAHUE, N.H. INSTITUTE FOR POLITICS: I think that for a Democrat like Mark Penn to act this way makes him look like Karl Rove. And I think New Hampshire voters are so sick of Karl Rove and the Bush operation. And if Hillary Clinton‘s campaign starts to look like the Bush machine and they start to make the case that the only way to beat the Republicans is to play by their playbook, she is going to really hurt herself.

As you said earlier in the last segment, I have met her in person, too. And she is really nice. This is not Hillary Clinton. This is a playbook being written by Mark Penn, and she had better abandon it, because I don‘t think Bill Shaheen, who I also know very well, meant to hurt her. And he stepped back quickly so that she would—he would get out of the story and she could continue her campaign.

MATTHEWS: Do you think Bill was an agent in that case? I don‘t know Mr. Shaheen, I‘ve met his wife, was he an agent in this case or just an uninformed, out of the loop supporter?

DONAHUE: Bill is an old school pol. He says what he thinks and says too much sometimes and he did that in this case. He wants a nominee who can win. He backed Kerry. The only way for him to get Kerry to win was to take the “whole truth” to Iowa. That was Bill‘s idea. He was also the one who took the rope line away for Gore, got Gore to beat Bradley. Bill Shaheen is the fix-it man. It is really bad for Hillary Clinton that he is out of this race. But Bill Shaheen did not get put into a setup on purpose. Bill Shaheen made a mistake.

MATTHEWS: Right. We will come back. This campaign is getting very close in. We will be right back with our roundtable. More with the political fix when come back, the “Politics Fix.”

(COMMERCIAL BREAK)

MATTHEWS: We are back with politics. Jennifer, you are up in New Hampshire, which is sort of the middle state here between Iowa, which is coming up so quickly now, and then after that, South Carolina.

The more I look at it, I‘m reminded of mathematics where you say, this is a function of something else. This is going to be a result of something else. If you look at the history, New Hampshire is always about a 10-points bounce for whoever wins in Iowa.

And then you look at South Carolina and we are looking at the African-American vote, unfortunately, we don‘t have an African-American colleague with us right now, but the fact is that everybody says that the African-American vote will move depending on the electability—the probable electability of the Barack Obama.

You could see a situation where if he does win in Iowa, he wins in New Hampshire and then he wins in South Carolina. And then you really do have a mano-a-mano nationwide on February 5th between Hillary and Obama. That could be the scenario here.

DONAHUE: It really could. And that‘s where all bets are off, because I don‘t think any of us can predict what would happen February 5th. We know we would have a badly damaged Hillary Clinton because the expectation going into this is that she would do well in Iowa, do well in New Hampshire.

So things would be upside down. She would still have a base. But I think what this election is really about, Chris, and what we are going to see in Iowa, New Hampshire, South Carolina, and February 5th is the past and the future.

Experience is another word for the past. Future is another word for a fresh face. And the past, the candidates who have experience aren‘t doing well. Hillary Clinton, John McCain, Dodd, Biden. Who is doing well? Huckabee, Romney, Obama. Let‘s think about where things are going. I don‘t know if that happened down South (ph), but I feel a pulse moving.

MATTHEWS: OK. That is all wonderful except I have spent my life watching the Democratic Party hedge its bet on change. After they look at the new guy, they change, they go back to the hedging bet. Let me ask you a (INAUDIBLE) question. The function of how these things fit together, like Chinese boxes, New Hampshire, it matters a lot in who wins New—I‘m sorry, what happens in Iowa determines what happens in New Hampshire to a large extent, and then on to South Carolina. Put it together.

CRAWFORD: Yes. There is a domino effect. And by that analysis, Rudy Giuliani cannot win the Republican nomination. He is in worse shape in Iowa and New Hampshire and South Carolina than Hillary Clinton is. In fact, we just.

MATTHEWS: He is in terrible shape in South Carolina, we just saw that.

CRAWFORD: We just got a new poll out of Florida, he has lost his lead in Florida. I mean, we are starting to see it impact in those states.

CRAWFORD: I actually don‘t understand why we have been talking all week.

MATTHEWS: Stephen, Stephen Hayes. Stephen Hayes, give it a shot.

HAYES: I think it is way too early to be saying that anybody is not viable. I mean, I think you actually have a race, especially on the Republican side, in which you have five candidates who are all viable and you can draw plausible scenarios.

MATTHEWS: Who else is viable? You think McCain? McCain could win this whole thing?

HAYES: McCain could win the whole thing. Look, McCain is now closing on Romney in New Hampshire with interesting numbers out a couple of days ago.

MATTHEWS: Who is (INAUDIBLE) who is the other outsider?

HAYES: I would say Thompson, as crazy as it sounds. Thompson is still viable. He had a good debate performance the other day. He is throwing everything into Iowa at this point. If he finishes a strong third or even a second in Iowa, does everybody stop and say.

MATTHEWS: I am not going to discourage guys from running, but that is a pretty wild prediction.

MATTHEWS: I mean, nobody knows, and I think it is great. I hope—I am ready for surprises, but if Huckabee wins in New Hampshire.

CRAWFORD: The graveyard is littered with.

(CROSSTALK)

MATTHEWS: If New Hampshire goes for a guy like Huckabee, I would find all my notions of the state you are in, Jennifer, completely upside down.

DONAHUE: That would be the big surprise.

MATTHEWS: That would be huge. Anyway.

DONAHUE: That would be upside-down.

MATTHEWS: Anyway, as Donald Trump would say, “that would be huge” Anyway, Jennifer Donahue, it is great to see you, happy weekend. Stephen Hayes, Craig Crawford. Join us again Monday at 5:00 and 7:00 Eastern for more HARDBALL. We‘ll be on the campaign trail next week from Iowa. Right now it‘s time for “TUCKER.”

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

END

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